Tapping the Markets: Opportunities for Domestic Investments in Water and Sanitation for the Poor

by World Bank, Robert Warner, Jane Jamieson

Overview

What steps are needed to enable the domestic private sector to expand its role in the provision of safe water and improved sanitation to the poor in developing countries? Is an expanded role constrained because of limited market potential, are business models unable to support an expansion of supply, or do government policy and the broader climate for investment inhibit enterprises? Tapping the Markets: Opportunities for Domestic Investments in Water and Sanitation for the Poor presents the results of a detailed examination of market opportunities for the domestic private sector in the provision of piped water and on-site sanitation services in rural and semi-urban areas and of the commercial, policy, and investment climate factors that affect the response to these opportunities. It is based on case studies conducted in Bangladesh, Benin, Cambodia, Indonesia, Peru, and Tanzania. The results of focus group discussions with poor households, surveys of enterprises that directly serve poor households, and analysis of the supply chains that support them provide insights into the nature of demand for services, the prevailing business models of enterprises, and the impact of policy on decisions to invest or expand operations. The issues that prevent local enterprises from tapping the large market for providing poor and nonpoor households with piped water and on-site sanitation differ in important ways across the two sectors. The first part of the book analyzes the challenges that domestic providers of piped water face in Bangladesh, Benin, and Cambodia, countries with very different models of private provision. The second part analyzes the delivery of on-site sanitation services in Bangladesh, Indonesia, Peru, and Tanzania, countries where all providers face supply and demand challenges that are largely unaffected by government policy. Tapping the Markets will be of interest to governments, their multilateral and bilateral development partners, and local and international nongovernment agencies that focus on reducing the impact of lack of access to safe water and hygienic sanitation. The authors propose recommendations for harnessing the entrepreneurial capabilities of the domestic private sector and for addressing this continuing challenge.

Product Details

ISBN-13:	9781464801341
Publisher:	World Bank Publications
Publication date:	01/10/2014
Series:	Directions in Development
Pages:	143
Product dimensions:	6.80(w) x 9.90(h) x 0.50(d)

Table of Contents

Foreword xiii

Acknowledgments xv

About the Authors xvii

Abbreviations xix

Overview 1

Part 1 Water 7

Overview of the Water Sector 7

Market Potential for Rural Piped Water Schemes 8

Constraints to Serving the Market 8

Recommendations 11

Note 14

Chapter 1 What Is the Problem? 15

Access Is Inadequate 15

The Costs Are Borne Largely by the Poor 16

Governments Cannot Solve the Problem 16

References 17

Chapter 2 Why This Study? 19

Note 20

References 20

Chapter 3 Water Networks and the Role of the Government 21

Salient Features of Networks 21

Role of the Public and Private Sectors 22

Reference 22

Chapter 4 Is Market Potential Sufficient to Justify Private Investment? 23

Reference 28

Chapter 5 What Affects Demand for Water? 29

Cost of Water (Tariffs and Connection Fees) 29

Competition from Other Sources of Water 31

Service Features of Importance to the Poor 34

Note 35

Reference 36

Chapter 6 How Is Piped Water Supplied? 37

Firm Characteristics 37

Business Models 40

Financial and Cost Profile 42

Drivers of Profitability 46

Notes 50

References 51

Chapter 7 Are Firms Interested in Increasing Investment and Serving the Poor? 53

Intentions to Invest 53

Perceived Risks 55

Perceptions of the Poor as a Target Market 56

Note 58

Chapter 8 Is the Investment Climate Limiting Private Sector Involvement? 59

Government Policy and Practice 59

Infrastructure 62

Access to Finance and Financial Services 63

Note 65

Chapter 9 Conclusions and Recommendations 67

Conclusions 67

Recommendations 71

Part 2 Sanitation 75

Overview of the Sanitation Sector 75

Market Potential for On-Site Sanitation Services 76

Constraints to Serving the Market 76

Recommendations 79

Chapter 10 What Is the Problem? 83

Access Is Inadequate 83

Poor Sanitation Imposes Very High Costs on Developing Countries 83

Governments Cannot Solve the Problem 85

Note 85

References 85

Chapter 11 Why This Study? 87

Note 88

Chapter 12 On-Site Sanitation Services in the Case Study Countries 89

Note 90

Chapter 13 Is Market Potential Sufficient to Justify Private Investment? 91

Economic Drivers 91

Policy Drivers 92

Rethinking Market Drivers 93

Notes 97

References 97

Chapter 14 What Affects Demand for On-Site Sanitation? 99

Cost 99

Cash Constraints 99

Importance of Sanitation to Households 101

Women's Role in Decision Making about Sanitation 104

Note 106

References 106

Chapter 15 How Is On-Site Sanitation Supplied? 107

Enterprise Characteristics 107

Business Models 110

References 116

Chapter 16 Are Enterprises Interested in Increasing Investment and Serving the Poor? 117

Intentions to Invest 117

Perceived Risks 118

Perceptions of the Poor as a Target Market 119

Chapter 17 Is the Investment Climate Limiting Private Sector Involvement? 121

Government Policy and Practice 121

Infrastructure 123

Access to Finance and Financial Services 124

Chapter 18 Conclusions and Recommendations 127

Conclusions 127

Recommendations 130

Appendix A 133

References 137

Appendix B 139

References 143

Box

6.1 Construction of Water Networks in Benin 49

Figures

1.1 Access to Improved Water in Bangladesh, Benin, and Cambodia, 1990-2010 16

2.1 Study Analytical Framework 20

5.1 Sources of Water among People with Access to a Water Network in Bangladesh and Benin, by Use, 2012 32

5.2 Water Consumption in Cambodia in Dry and Rainy Seasons, 2012 33

5.3 Factors Influencing Choice of Water Source by Poor Rural Households in Benin, 2012 34

5.4 Consumer Satisfaction with Piped Water System in Bangladesh and Benin, 2012 35

6.1 Size of Operators of Piped Water Networks in Bangladesh, Benin, and Cambodia, 2012 38

6.2 Legal Status of Water Network Operators in Bangladesh, Benin, and Cambodia, 2012 39

6.3 Share of Water Network Operators Covering Operating Costs and Full Costs in Bangladesh, Benin, and Cambodia, 2012 43

6.4 Breakdown of Cost of Water Network Operations in Bangladesh, Benin, and Cambodia, 2012 45

6.5 Cost and Revenue Patterns of Water Network Operators in Bangladesh, Benin, and Cambodia, 2012 46

6.6 Correlation between Piped Water Operators' Net Profits and Investment in Bangladesh and Cambodia, 2012 47

6.7 Private Connection Fees in Bangladesh, Benin, and Cambodia, 2012 48

7.1 Enterprises' Intentions to Invest in Existing or Additional Water Networks in Bangladesh, Benin, and Cambodia, 2012 54

7.2 Areas for Future Investment Identified by Water Operators in Bangladesh, Benin, and Cambodia, 2012 54

7.3 Obstacles to Investment in Existing and Additional Networks in Bangladesh, Benin, and Cambodia, 2012 55

7.4 Enterprises' Perceptions of the Poor as Potential Customers in Bangladesh, Benin, and Cambodia, 2012 56